Anglo-Irish Bank, which is at the centre of a €87m hidden loans scandal involving former chairman Sean Fitzpatrick, will receive €1.5bn of taxpayers’ money to keep it from going under.

The Irish state will now take effective control of Anglo with 75% of the voting rights.

Bank of Ireland and Allied Irish Bank will each receive €2bn under the first phase of the recapitalisation process, with the potential of another €1bn each to underwrite bad debts.

In exchange for the Dublin government’s multi-billion intervention, banks will have an additional 10% capacity to lend much-needed cash to small businesses.

They will also have a 30% extra capacity to lend to first time buyers.

Crucially, mortgage owners in the Republic who fall into arrears will be given at least six months from the time they first enter debt before any legal action on repossession will be enforced.

Announcing the multi-billion bailout in Dublin after intense negotiations, the Taoiseach said the recapitalisation will send a “strong signal” about the stability of the Irish financial system and to ensure the lines of credit are reopened.

However, he said the Irish government was not making the resignation of bank chiefs a precondition of the bailout, despite mounting public anger over the secret loans fiasco which have already led to the resignations of three senior Anglo Irish Bank executives.

Chairman Sean Fitzpatrick resigned last week after it emerged he borrowed €87m from the bank and hid the loans off the books for eight years.

He was joined by fellow Anglo director Lar Bradshaw and chief executive David Drumm.

However, the Irish Independent learned that the Financial Regulator, Partick Neary, will stand down when a three-week government investigation into his office’s handling of the loan scandal has been completed.

The investigation, which is due to be completed on January 9, is also likely to result in further resignations.

When asked about the position of the Financial Regulator last night, Finance Minister Brian Lenihan revealed “at some level within the Regulatory structure, there had already been an awareness of the particular loan to Mr Ftizpatrick.”

He added: “That’s a very very serious matter and on Friday I asked the chairman of the board to examine this issue.

“The board had no knowledge of that transaction and that of course is very serious. The board has confirmed it has established a process of enquiry into the levels of knowledge that existed within the Regulatory structure. As I understand it, there are three officials involved and their versions of events have to be checked and cross checked.

“I’m not aware whether Mr Neary knew or not but there are different versions of events and I’m aware that on one version of events, he did. But those versions of events have to be resolved and I’m not in a position to resolve those issues.”